Bridges Weekly Trade News Digest • Volume 13 • Number 17 • 13th May 2009
Latin American Countries Commit US$ 7 billion for ‘Bank of the South’
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Trade ministers from seven Latin American countries meeting in Buenos Aires last week agreed on a charter for a Bank of the South (Banco del Sur), an institution to fund infrastructure projects and development in the region.
Under the proposed charter, Argentina, Bolivia, Brazil, Ecuador, Paraguay, Uruguay and Venezuela would each become founding members of the regional bank.
“We have settled all the pending points,” Argentina’s Carlos Fernandez said after the meeting, according to a report from EFE news service. No official date has been set for the launch of the institution, but Fernandez wants to see it up and running “as soon as possible.”
The charter must be endorsed by each of the countries’ presidents and law-making bodies before it can take effect, but several ministers indicated after the meeting that they believed it would win swift approval.
The bank, which will be headquartered in Venezuela, will start off with a total of US$ 7 billion in capital. Argentina, Brazil and Venezuela will offer up US$ 2 billion each, while Uruguay and Ecuador will both provide US$ 400 million and Bolivia and Paraguay will each chip in US$ 100 million.
Unlike the multilateral International Monetary Fund (IMF), the Banco del Sur will give all of its member countries the same level of voting power, regardless of the size of each country’s financial contribution to the institution. But decisions concerning loans worth more than US$ 70 million will require the approval of countries that represent at least two-thirds of the bank’s total capital.
Leftist Venezuelan leader Hugo Chávez has long advocated the development of such a bank as a means of reducing the region’s reliance the IMF and other multilateral institutions, which usually attach a number of conditions and restrictions to the loans they give.
The Bank of the South “could be an alternative to finance other projects that the IMF and World Bank do not finance,” Gabriel Strautman, a Brazilian economist, said in an interview recently with Al Jazeera news service.
“We need to have a different governing system for those banks that is more ‘one country, one vote’… I think that is the basis to start thinking on a new global financial architecture,” Strautman said.
ICTSD reporting; “Seven Latin American governments reach accord on regional bank,” EFE, 9 May 2009; “Brazil mulls new financial order,” ALJAZEERA.NET, 24 April 2009; “Banco del Sur, listo para operar,” PRENSA LATINA, 9 May 2009.
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